CDPQ backs Innergex’s $1.1B acquisition of Alterra Power

Innergex Renewable Energy Inc. (TSX: INE) has agreed to acquire Alterra Power Corp. (TSX: AXY) at $8.25 per Alterra shares, by way of arrangement agreement, for an aggregate consideration of $1.1 billion, including the assumption of Alterra’s debt.

Alterra shareholders will receive an aggregate consideration which will consist of approximately 25% in cash and 75% in common shares of Innergex. The price of $8.25 per Alterra shares implies a premium of 58% to Alterra’s 20-day volume weighted average price of $5.21 on the TSX as of October 27, 2017.

The Innergex common shares issuable to Alterra shareholders in connection with the Transaction represent a pro forma ownership of approximately 19% of the combined company. One member of the current board of directors of Alterra will join the board of directors of Innergex upon closing of the transaction.

Innergex has entered into a support and voting agreement with Ross Beaty, Executive Chairman of Alterra, and certain related entities who have control over approximately 31% of Alterra’s issued and outstanding common shares.

“This transaction is highly strategic and accretive for Innergex as we believe it significantly accelerates Innergex’s growth profile with a path to reach a net installed capacity of over 2,000 MW by 2020,” said Michel Letellier, President and Chief Executive Officer of Innergex. “The geographic and energy sources profile of Alterra’s portfolio further diversifies Innergex’s asset base by adding operating hydro and wind projects in Canada, a large number of operating, under construction and prospective wind projects in the U.S. and operating geothermal assets in Iceland. Further, we believe that the addition of Alterra’s seasoned and experienced team to Innergex’s team enhances our ability to concurrently develop multiple projects across many geographies.”

“This is an excellent transaction for Alterra shareholders,” said Ross Beaty, Executive Chairman of Alterra. “It offers a significant premium and the opportunity for Alterra shareholders to remain exposed to Alterra’s assets, including our growth pipeline. Innergex is an outstanding Canadian clean energy company with highly complementary renewable energy assets to those of Alterra and a similar corporate culture. The combined company will have a lower cost of capital, stronger balance sheet, more diversified asset base and greater capacity to grow rapidly and efficiently. I look forward to tendering my Alterra shares into Innergex and remaining a significant shareholder for many years to come.”

Innergex has structured the financing of the cash portion of the transaction in order to maintain a strong and flexible balance sheet that provides for ample liquidity to fully fund Innergex’s development portfolio pro forma for the transaction. To that end, Caisse de dépôt et placement du Québec (CDPQ) has made a commitment to provide Innergex with a 5-year $150 million subordinated unsecured term loan at a competitive interest rate to be fixed at closing.

“Through this new loan and its existing stake in the company, la Caisse continues to support the development of major renewable energy projects managed by Innergex. The acquisition announced today accelerates Innergex’s growth plan by opening doors to new markets,” says Marc Cormier, Executive Vice-President, Fixed Income at la Caisse. “In addition to supporting a Québec company’s international expansion, this transaction is in line with la Caisse’s focus on increasing its investments in low carbon assets.”

Innergex has also obtained commitments from two leading Canadian banks to backstop its existing credit facilities, to implement the transaction and to upsize its revolving credit facility to an aggregate amount of up to $700 million, representing a $275 million increase from the principal amount of $425 million under its existing revolving credit facility.

Alterra owns a 54% interest in a subsidiary which owns a 30% stake of the Blue Lagoon Geothermal Spa and Resort located in Iceland. Innergex intends to review the future ownership of this non-core asset.

BMO Capital Markets is acting as financial advisor and McCarthy Tétrault LLP is acting as legal counsel to Innergex.

photo credit: Alterra Power Corp.

Ted Liu

Ted Liu, M.Sc. (Mining, Queen's), MBA (Finance, Toronto), is the Editor of Private Capital Journal, CanadaMetals.ca, TechWire.ca, and the former Editor of Canadian Private Equity. Ted has been passionately tracking Canadian private capital industry since 1992, having most recently served as Research Director for The Canadian Venture Capital and Private Equity Association (CVCA).

Ted is the architect of CVCA infobase, and is the architect of CPE Media's Financings.ca, Canada's most sophisticated and advanced all private capital and public market financing database.